Introduction
The purpose of this report is to define key problems and critical issues of easyJet, discuss McKinsey’s 7S framework, analyse driving forces, external environment and the position of the company comparing with competitors.
Key Problems and Critical Issues
This company has to consider both internal and external problems, for instance, the management of this company faced challenges to control internal management system and implement a strategic plan like motivate the employees, changed the status from private to public, use subcontractors, maintain a relationship with directors and customers.
However, a reporter Sunday Times investigated availability of its low fares and stated that easyJet theoretically asked low price, but practically the customers have to pay more while the price of the services depends on many factors including time factors (earlier flight was much more expensive), taxation policy, unrealistic decision of the management and so on.
SWOT Analysis
Table 1: SWOT analysis of easyJet
Source: Self-generated
McKinsey Seven 7S Framework for easyJet
- Strategy: The core organizational strategy of the company is to offer highly competitive fares and sustain in the market by competing with existing and new carriers;
- Systems: the management system has considered both manual and technological factors; however, easyJet is fully equipped with IT facilities;
- Shared Values: It consists of three essential elements culture, believes and values; easyJet has organized several programs like workshops, and simulations to explain its objectives and develop a good relationship with employees and other shareholders;
- Skills: To develop the employee’s performance, it arranged training while it has many young and relatively inexperienced employees;
- Style: Stelios was a charismatic leader who struggled to shape the business though he followed the autocratic leadership style to implement major decision;
- Staffs: Retention of the employees is the problem while competitors recruit the employees of easyJet providing a higher salary, for instance, British Airways hired away its lawyer providing £500,000 per year;
- Structure: easyJet follows a comparatively complicated organizational structure where CEO controlled managers of all departments along with subcontractors, outside vendors.
Driving Forces
It is notable that although there are certain deficiencies among the workforce of easyJet, its internal-forces are still quite impressive because of expertise and proficiency of the top management and the CEO (although the CEO is somewhat authoritarian and does not bother much about directors’ advises); so, the forthcoming position of easyJet could be optimistic; however, the external forces are analysed below:
- Bargaining Power of Suppliers: the key suppliers like Boeing and Airbus have moderate to high bargaining powers
- Bargaining Power of Customers: the customers in this industry respond greatly to raising fares as their switching costs are relatively low
- New Entrants: the barriers to enter the market are vast amounts of capital investments and strict laws, which makes it tough for new entrants to start-up and sustain
- Threat of Substitutes: there are high threats of substitutes
- Competitive Rivalry: there are strong rivalry from other low-cost carriers
Analysis of Statute Vs Competition:
To protect the flag carriers and national businesses, most countries enacted laws to prevent competition; nevertheless, in 1992, the EU passed legislation to deregulate the industry, which meant that all businesses faced extreme rivalry.
Enactment of such statute became a huge problem for luxurious and expensive flag carriers like British Airways, because people now had a choice to travel by low-cost carriers like easyJet, go, or Ryanair; consequently the competition in the industry became very intense; conversely, low-cost carriers from different European nations started competing by offering economical prices to attract customers.
Environmental Scanning
Political Factors
Governmental policies like unfriendly taxation or enactment of unfair autocratic laws may pose problems for the players; however, the EU ensures that such actions are prevented and the member states are compliant with the EU-laws.
Economic Factors
The industry is recovering after the global financial crisis and new opportunities are generated for low-cost carriers like easyJet and Ryanair
Socio-Cultural Factors
The market players of the industry have incorporated their own corporate social responsibility guidelines in order to make sure that they are conducting ethical businesses and contributing to communities.
Technological Factor
The aviation industry is heavily reliant on the uses of technology and so the market players need to keep up with technological advancements in operations and new aircraft models.
Environmental Factor
The European aviation industry needs to strictly comply with all the environmental laws and make sure that the emission of CFCs is lower; moreover, companies like easyJet need to use fuel-efficient engines.
Legal Factors
Legislation plays a major role in the industry; in the 1990s, the European airline industry was greatly regulated, and individual nations wanted to protect their flag carriers; however, in 1992, the EU passed law to deregulate the industry, which meant that all airline businesses were open to competition; as a result, easyJet now experiences free market competition.
Where Is Easy Jet Today
Whilst 60 out of 80 carriers (which were established in the same decade) are already bankrupted, easyJet is still in a leading position in the industry; moreover, today, deregulation provided easyJet access to new routes, strengthening its position financially, for example, it has about 100 scheduled flights each day using a fleet of 20 Boeing 737s and serving 26 destination.
Evaluation of Range of Alternative Courses of Action
Table 2: Strategic Alternatives
Source: Self-generated
Recommendation and Conclusion
After evaluating the alternative courses of action, it could be said that the best recommendation for the company would be to implement the alternative of adopting a situational approach of leadership so that the business can better perform in certain areas, as suggested in the above evaluations. However, easyJet should remain cautious in undertaking strategies and in decision-making to make sure that there is an active revenue generation even during the Eurozone crisis.
Works Cited
Branson, Richard. The Web’s Favourite Airline. 2000, International Institute for Management, Switzerland